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The Commerce Ministry strongly believes that until issues concerning exports are addressed a mid-term review of the foreign trade policy (FTP) will be meaningless.
Commerce Minister Suresh Prabhu has written to Finance Minister Arun Jaitley raising concerns and seeking quick remedies.
The five-year FTP (2015-2020) had laid down a stiff target of $900 billion of annual exports by 2020 but lack-lustre performance in the last two-and-a-half years, will compel the government to bring it down drastically. “Annual exports have been lower than $300 billion during the first half of FTP due to issues such as global slow-down and currency fluctuation. While things seem to have improved, a complete recovery and acceleration in growth will be difficult without incentives,” a government official said.
Prabhu stressed on improving usability of the scrips earned under the MEIS — the most popular incentive scheme for exporters covering more than 7,000 items — as post-GST the scrips can be used for payment of only customs duties. This has reduced the premium on the scrips (valued at 2-5 per cent of export amount) as earlier it could be used for payment of all input taxes such as central excise duty and service tax. “The Commerce Minister proposed that the MEIS scrips should be allowed to be used for payment of GST,” the official said.
He also proposed that the rate of MEIS be increased from 5 per cent to 7 per cent for labour-intensive sectors such as leather, footwear, handloom, handicraft, Ayush, marine products, electronic components and the MSME sector, which suffer the most during a downturn.
An enhanced rate from 3 per cent to 10 per cent in the Services Export from India Scheme (SEIS) has been proposed for hotels and restaurants. Ground handling services under civil aviation sector may also be eligible for incentives of 5 per cent.
Other proposals include reducing GST rate on sale of MEIS/SEIS scrips to zero per cent, increasing the rate of interest subvention from 3 per cent to 5 per cent for labour intensive sectors, have capital infusion of ₹2,000 crore in ECGC scheme, address working capital blockage due to pay first and then refund principle of GST, exempting merchant exporters from payment of GST and enhancing support for the trade-related Infrastructure for Export Scheme and Enhanced Support For Market Access Initiative schemes.
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